Creditors back Alabama county's bankruptcy plan

Reuters News
Posted: Oct 08, 2013 1:38 PM

By Melinda Dickinson

BIRMINGHAM, Alabama (Reuters) - Creditors in the $4.2 billion municipal bankruptcy case involving Alabama's Jefferson County have "overwhelmingly approved" the county's plan of adjustment, Jefferson County Commission President David Carrington said on Tuesday.

A group of creditors which included pension funds and individual investors had until an October 7 deadline to submit their votes on a bankruptcy exit plan approved in August by the judge in the case. Carrington said the final count will come later this week.

The approval comes after the county's biggest Wall Street creditors, including JPMorgan Chase & Co and Bank of New York Mellon, previously signed off on the plan, which will include losses of as much as 70 cents on the dollar.

The negotiated plan promises to deliver only $1.835 billion to sewer-system warrant holders owed $3.078 billion, with bondholder losses on a scale not seen since the 1930s.

Jefferson County was the largest municipal bankruptcy case in U.S. history until the city of Detroit in July sought protection from creditors under Chapter 9 of the U.S. bankruptcy code with a debt load exceeding $18 billion. That case is ongoing.

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Approval by the creditors paves the way for a year-end bond sale of about $1.9 billion that is needed to pay off current sewer debt bondholders at sizable discounts.

In November 2011, Jefferson County sought protection from creditors, stung by overwhelming sewer debt and diminished revenue.

The county has also struck deals covering defaulted school warrants and other non-sewer debt.

(Additional reporting by Kevin Gray in Miami; Writing by Dan Burns; Editing by Phil Berlowitz and Diane Craft)